the problem about inventory

[sunbull]

sometimes the FIFO COGS should be adjusted by LIFO reserve, sometimes the FIFO COGS should be adjusted by Delta LIFO reserve(reserve change). I am quite confused by under which circumstances should be adjust by only LIFO reserve and which circumstances should be adjusted by Delta LIFO reserve?

 

[CFAMontreal]

It depends on the purpose of your research. If you are comparing companies within a specific industry and the majority of them use LIFO method for accounting inventories, and only a few - FIFO, then it is easier to adjust FIFO to LIFO and vice versa - for the sake of comparibility of companies' financials

 

[sunbull]

: )CFAMontreal:
thanks for you reply, but you didn't grasp my real meaning, i am talking about the formula,not the conditions.

 

[jamespucyk]

Hey Sunbull from your last two posts titles it sounds like you were setting us up for some Grade A Seinfeld based CFA comedic material that only people on this board and a few select other would appreciate.

To answer your question you adjust LIFO Inventory by the LIFO Reserve to arrive at FIFO inventory and LIFO COGS by Delta LIFO Reserve to arrive at FIFO COGS. The difference is LIFO reserve is a stationary number and Delta LIFO Reserve is a dynamic number, which is applied for a period of time.

 

[sunbull]

Thank you for your reply, jamespucyk .
But ,what is the meaning of "Grade A Seinfeld "?

 

[jamespucyk]

Seinfeld, as in the comedian, as in: "What is the deal with deferred taxes? I mean they are expense items that cause the timing difference may never be reversed, so they often aren't exactly deferred, nor are they taxes in that case..." etc.